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Stamp Duty shock was attempt to bury bad news on immigration, claim
Property firm Martin & Co has acted to try and soothe industry fears after last week’s Budget Statement.
Martin & Co’s highly successful franchise business is predicated on private landlords.
Last Wednesday, George Osborne announced that buy-to-let purchasers would pay an extra 3% Stamp Duty Land Tax.
However, the Chancellor also said that the surcharges would not affect larger rental firms, such as institutional investors in the built-to-rent market.
ARLA – representing letting agencies whose typical client is a private landlord – described it as a catastrophe.
However Ian Wilson, chief executive of the Property Franchise Group, trading name of the more familiar Martin & Co, said this reaction was “overblown”.
He also suggested that the headline-grabbing change to buy-to-let Stamp Duty had helped bury bad news on immigration.
Wilson said: “While admittedly an unwelcome move for letting agents, we believe current thoughts as to the severity have been greatly exaggerated.”
Wilson said that the Chancellor’s intervention was a surprise.
He said: “It comes at a time when the buy-to-let market is working extremely efficiently, and we believe this move has been announced for political rather than economic reasons.
“Lending in this market is at record post-credit crisis levels, with over 1,000 buy-to-let mortgage products available, and about 20% of the population is now housed in the private rental market.
“The day after the Chancellor’s announcement, it was revealed that the Government had once again missed its target to reduce net migration into the UK, and the latest figures were at a new high with 336,000 people added to the UK population over the year.”
Wilson said that all drivers for further growth in buy-to-let remain in place, including high net migration and affordability.
He said he believed that total returns from buy-to-let will continue to outpace other investments, including traditional pensions, “and have the psychological and emotional advantage of being an easily understood, tangible asset”.
However, he also said that buy-to-let purchasers will factor raised Stamp Duty into the prices they are willing to pay, and “this will have a dampening effect on appreciating house prices in some sections of the market”.
Wilson said: “One may argue as a consequence, that buy-to-let purchasers could be out-bid purchasers for owner occupation (e.g. first time buyers).
“However, we believe buy-to-let purchasers will continue to be better placed to bid/complete on these properties given that they typically have more cash to inject and less restrictive buy-to-let mortgage conditions, meaning that there is greater certainty of the sale completing.”
Wilson, whose franchising firm now offers sales as well as lettings, said that the increased Stamp Duty was the “lesser of evils”.
He said: “Given the Government’s new-found desire to promote home ownership, we believe that higher transaction costs are significantly less severe than other potential regulatory levers, such as restrictions on buy-to-let lending or rent controls.
“In the short term, we would actually expect some benefit to the buy-to-let market, as we would expect prospective investors to bring forward purchases to before the April 2016 deadline for these changes.
“There is also the interesting possibility of tax engineering by creating corporate vehicles such as Real Estate Investment Trusts to own larger numbers of properties and escape both the extra Stamp Duty and the taper reductions in mortgage interest relief.”
